Online Observer

State of Alaska’s oil spill prevention and response funding unsustainable

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Council voices support for full funding

Photo of Representatives from the Alaska Department of Environmental Conservation and SERVS observing an oil spill exercise in Prince William Sound.
Representatives from the Alaska Department of Environmental Conservation and SERVS observe an oil spill exercise in Prince William Sound.

The State of Alaska’s Oil and Hazardous Substances Release Prevention and Response Fund is in trouble. Funding for the prevention of spills is projected to be in a deficit by 2025.

Reduced pipeline flow contributes to shortfall

The amount of money going into the accounts ebbs and flows according to how many barrels flow through the pipeline. The amount of oil, which peaked in 1988 at 2.1 million barrels a day, has slowed considerably over the years and is now averaging just over 500,000 barrels a day. The revenues from the .95 cent surcharge on refined fuels were also originally overestimated. These factors, combined with lack of adjustment for inflation, have all resulted in the shortfall.

Response account used for contaminations other than oil and gas

Compounding the revenue problems, money from the response account has recently been used for sites that have been contaminated with per- and poly-fluoroalkyl substances, or PFAS, which is a group of potentially toxic human-made chemicals. It is possible that more funds from this account will be targeted for PFAS testing and remediation in future years. As a result, the fund balance is shrinking and Alaska’s ability to respond adequately to a major oil spill may be at risk.

Currently, crude and refined oil industries are the only contributors to the fund, even though the response account is used for other hazardous substances, such as the previously mentioned PFAS, acid, drilling mud, antifreeze and for remediation of junkyards containing a multitude of hazardous substances.

Effects of reduced funds

The director of the Alaska Department of Environmental Conservation’s Division of Spill Prevention and Response, Denise Koch, spoke with the Council during a recent meeting, voicing concerns about how this shortage could affect the State. She reported that her department is under pressure to reduce its budget, with seven positions eliminated for the upcoming fiscal year. Without an increase in revenue they may lose additional positions in future years.

Council supports stable and adequate funding

During a meeting in January, the Council reaffirmed its position on the 470 Fund, and passed a motion supporting:

  • Revenue adjustments that include an increase in the .95 cent surcharge on refined fuel products.
  • Inflation-proofing the fund.
  • Broadening the tax base to collect revenue from non-oil industries that are served by the fund but do not currently contribute it.

Delays due to coronavirus

There was significant support for making the funding sustainable in both the Senate and House but the legislature recessed early due to coronavirus concerns and did not address the issue. The Council hopes to see a revenue adjustment during either a special session or next year.

How does this spill prevention and response fund work? Where does the money come from?

Commonly referred to as the “470 Fund” after the bill that created the law in 1986, it was meant to ensure adequate funds are on hand for immediate response to major spills, as well as for maintaining an effective prevention program. Designed to be self-sustaining, this fund pays for the State’s efforts to prevent spills of oil and other hazardous substances and the State’s ability to be prepared and respond quickly to spills when they happen.

To accomplish this, a 5-cents-per-barrel tax is paid to the State by the producers of the crude oil that flows through the Trans Alaska Pipeline System. The 470 fund is separated into two accounts: Four of the five cents go into an account for spill prevention, and one cent goes into an account to support response. Additionally, a .95 cent surcharge on refined fuel products is collected for spill prevention. Both accounts collect settlement penalties and interest earnings. Those who spill substances are also required to reimburse the State for those costs.

Council recertified as official citizens’ advisory group in Prince William Sound

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Storage Tanks at Valdez Marine TerminalThe U.S. Coast Guard has recertified the Council as meeting its responsibilities under the Oil Pollution Act of 1990. In a February 25 letter to the Council, Rear Admiral M. T. Bell, Commander of the Coast Guard’s District 17 in Juneau, notified the Council of recertification. The Act requires the Council to be recertified annually as the official citizens’ advisory group to the oil industry in Prince William Sound. Guidelines established in 2002 streamlined the recertification process for two out of three years, with every third year requiring stricter procedures. The more extensive process was used this year. The new recertification expires February 28, 2021. At that time, the Council is scheduled to undergo the streamlined version of recertification.

The Council received almost 70 letters of support from organizations, agencies, businesses, Native corporations, and members of the public during the recertification process. Copies of the Council’s application for recertification or letters of support received can be obtained by contacting Brooke Taylor at brooke.taylor@pwsrcac.org.

New Board member for Chugach Alaska

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Ben Cutrell

At the January meeting, the Council’s Board of Directors seated a new member, Ben Cutrell, as the representative for Chugach Alaska Corporation.

Cutrell was born and raised in Wasilla, Alaska. He moved to Anchorage to pursue a Bachelor’s of Natural Science and Biology from the University of Alaska Anchorage. Upon completion of his degree, he went to work for Chugach Alaska Corporation. At Chugach, he works in the Lands department on special projects that help protect and preserve Corporation and heritage land for future generations.

Cutrell replaced Peter Andersen, who resigned in late 2019. Cutrell was also seated as a member-at-large on the Executive Committee, filling the seat left vacant by Andersen.

Meet the Council’s Board of Directors

Transparency is the foundation of public trust

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Donna Schantz

By Donna Schantz
Executive Director

Public trust in our oil spill prevention and response system took many years to rebuild after the 1989 Exxon Valdez oil spill. It took a commitment to transparency, listening, and engaging stakeholders in developing and maintaining the system of safeguards for the Valdez Marine Terminal and associated tankers that we have today.

Photo of Donna Schantz
Donna Schantz

This system is now widely regarded as one of the best in the world. Strong State of Alaska statutes and regulations have supported this robust system. The lack of significant spills in Prince William Sound over the last 30 years indicates the effectiveness of industry meeting or exceeding regulatory requirements.

Trust in the system is at risk

Over the past few years, the Council has been seeing a steady erosion in regulatory oversight, staffing, funding, and coordination among many of the federal and state agencies responsible for enforcing strong laws and regulations. This alarming erosion has already started to reduce public trust in our prevention and response system.

In enacting the Oil Pollution Act of 1990, Congress determined that only when local citizens are involved in oil transport will the trust develop that is necessary to change the system from confrontation to consensus, and so the Act called for creation of citizen councils. Our Council is a unique partner for industry and regulators, giving them a platform to provide information, answer questions, listen to stakeholders, and cultivate the long-term relationships that are necessary to establish public trust.

While the Council has had disagreements with industry over the years, there have been numerous examples of industry, regulators, and citizens working cooperatively and collaboratively to find solutions. The success of these collaborative processes has been founded upon the transparent sharing of technical and scientific information; stakeholders felt informed, heard, and included in the process, resulting in trust and acceptance of the results.

However, an effort is currently underway to reform current oil spill regulations and statutes, reportedly to make them less burdensome on industry. We have seen a shift in philosophy among some decision makers that the details in the oil spill prevention and response contingency plans, and the regulations that guide them, are unnecessary and distracting. However, there is a lack of clear information on what is problematic.

It is unreasonable to claim now, decades later, that existing requirements are too onerous on industry. Industry has demonstrated a commitment to the environment through safer operations, implementing new technologies, and integrating lessons learned. Alyeska Pipeline Service Company and the Trans Alaska Pipeline System tanker operators have worked with regulators and citizens for 30 years to continuously improve the system and operate profitably. Any perceived financial burden to industry should be weighed against the devastation and enormous burden another major oil spill would place on the people, fish, wildlife, and environment of our region.

It appears that some may not fully understand or appreciate the legacy they have been entrusted to protect. Without transparency about what direction this potential regulatory reform may be going, it is difficult for those with historical knowledge, like the Council, to respond and advise.

Transparency is the antidote to mistrust

The Alaska Oil Spill Commission found that starting in 1981 there was a dramatic decline in regulatory oversight, and that decline contributed to the Exxon Valdez oil spill. An official recommendation to the Alaska legislature after the 1989 Exxon Valdez oil spill was, “The nation and the state need strong, alert regulatory agencies fully funded to scrutinize and safeguard the shipment of oil.”

As those who experienced firsthand the devastation of the 1989 spill are retiring or are no longer with us, the Council has increasingly become a repository of the knowledge and lessons from that disaster.

We hope that any movement towards regulatory changes will include a thorough public input process with adequate time for information to be shared, reviewed, and commented on. Only through active citizen engagement and community relationship building can public trust in the oil spill prevention and response system be upheld.

The Council will do everything possible to make sure the safeguards put in place over the past 30 years are not weakened, and to protect the region’s stakeholders who would be most impacted by another catastrophic spill. The Council was created for this role, in anticipation of the time when enough of the memory of Exxon Valdez oil spill had faded such that the robust system put in place to prevent an accident like that from ever happening again begins to look overbearing and burdensome. The Council continues to raise awareness and provide reasonable and justified resistance to regulatory and statutory changes that could weaken existing protections.

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